AirwaySim
Online Airline Management Simulation
Login
Username
Password
 
or login using:
 
My Account
Username:
E-mail:
Edit account
» Achievements
» Logout
Game Credits
Credit balance: 0 Cr
Buy credits
» Credit history
» Credits FAQ

Author Topic: Question on new Loan Structure  (Read 2861 times)

charger27

  • Former member
Question on new Loan Structure
« on: April 20, 2009, 06:40:41 PM »
If I want to pay back my loan early - is the amount that is given for "early termination" a penalty over and above my principle loan, or is it a pro-rated amount for the loan itself?
If it is a penalty... it is just a few dollars short of the initial loan - wow.

Also... my credit rating is going down at an alarming rate.
In the world I live in - if all payments are made on time, that BUILDS a good credit rating, not destroys it.
Kinda bogus.

Offline Dan380

  • Members
  • Posts: 389
Re: Question on new Loan Structure
« Reply #1 on: April 20, 2009, 06:44:38 PM »
IRL, paying a loan of early gives you a bad credit rating, as you break the contract and the bank gets less money.  ;)

charger27

  • Former member
Re: Question on new Loan Structure
« Reply #2 on: April 20, 2009, 06:48:56 PM »
IRL, paying a loan of early gives you a bad credit rating, as you break the contract and the bank gets less money.  ;)
Great, but I haven't paid it back yet because of my above question.  ;)

Offline Sami

  • Administrator
  • Members
  • Posts: 14545
    • AirwaySim - Are you the next Richard Branson?
Re: Question on new Loan Structure
« Reply #3 on: April 20, 2009, 06:49:55 PM »
IRL, paying a loan of early gives you a bad credit rating, as you break the contract and the bank gets less money.

Are you sure? Sounds strange ...

Anyway, early payments do not affect the credit rating, for now at least.

Offline Dan380

  • Members
  • Posts: 389
Re: Question on new Loan Structure
« Reply #4 on: April 20, 2009, 06:53:37 PM »
Ok, I admit I could be wrong there Sami. Just I'm sure I can remember my financial studies teacher advising against paying back loans early for that reason. The same as the best way to get a good credit rating on a credit card is just to pay the monthly limit and not the whole amount owed on the card. Bank gets more money = more likely to grant you a loan.

charger27

  • Former member
Re: Question on new Loan Structure
« Reply #5 on: April 20, 2009, 06:55:13 PM »
Are you sure? Sounds strange ...
Anyway, early payments do not affect the credit rating, for now at least.
I agree with you Sami - I recently paid out a mortgage early and my credit rating went up, not down.
In fact, the rating went up more than if I had stuck to the full term payment schedule.

Offline swiftus27

  • Members
  • Posts: 4395
Re: Question on new Loan Structure
« Reply #6 on: April 20, 2009, 07:35:03 PM »
OKAY:  I will do some work here. 

My qualifications:

1.  Been in banking since 2000.
2.  Masters in Business Administration.
3.  Qualified underwriter.  (In the USA)

Answering above confusion:

1.  What most negatively affects your credit most are the following:
a.  Poor payment history
b.  Too high of balances/credit limits
c.  Too many new trades (credit lines)
d.  Thin file (too few trades)  or what we call Lack of established history

and to a lesser degree

e.  Moving around too much (yes, it can)
f.  Too many trades (simply like having way too much exposure out there). 

2.  Paying loans off early does NOT hurt you at all .... unless it is your only open credit account.   It usually helps your score as stated previously. 

3.  Paying your monthly minimum is better.  NO NO NO NO NO NO NO.  WRONG.       First off, you will be accruing interest which will only compound over time.  Secondly, the only reason you dont want to pay your whole credit debt is if you are establishing credit.  You won't be able to show a consistent pay history if your credit is new and the balance is paid in full each month.  The CBR algorhythms take many factors into account.

4.  NOT RELATED...  Never close 5 cards and consolidate into 1.    You go from having $10,000 used on 50,000 limits... then you end up $10,000 on 10,000 limits.... see 1b. 

5.  There are really only a few things that a bank can not use in its decision to lend credit.  Look up REG B in American lending.  You can not descriminate based on Race, Creed, Religion, Age, Receipt of Public assistance....


NOW WITH THIS SAID:

Sami is using a quasi BOND-LOAN system.   Your 'rating' will go down because of the fact that you are more leveraged and have no collateral to back it up.  You are a greater risk to future loans right now.  He is correct in lowering your rating.
« Last Edit: April 20, 2009, 07:38:49 PM by swiftus27 »

Offline Dan380

  • Members
  • Posts: 389
Re: Question on new Loan Structure
« Reply #7 on: April 20, 2009, 07:38:56 PM »
My qualifications:

1.  Been in banking since 2000.
2.  Masters in Business Administration.
3.  Qualified underwriter.  (In the USA)

I'll take your word for it then!  :laugh:

oswegobag

  • Former member
Re: Question on new Loan Structure
« Reply #8 on: April 20, 2009, 08:09:26 PM »
I agree 100% with Swiftus27 and I also work at a bank and look at credit reports all day long giving out loans.

charger27

  • Former member
Re: Question on new Loan Structure
« Reply #9 on: April 20, 2009, 11:18:15 PM »
If I want to pay back my loan early - is the amount that is given for "early termination" a penalty over and above my principle loan, or is it a pro-rated amount for the loan itself?
If it is a penalty... it is just a few dollars short of the initial loan - wow.
Ok... the credit thing is sort of answered.
Do I agree with making payments on time and having my credit score lowered significantly? NO.

I still need an answer on what was actually my primary question on penalty or pro-rate.
It reads like penalty, but clarification would be nice.
I always liked to pay off my loans quickly... so this will impact my borrowing plans from now on.

thetallone24

  • Former member
Re: Question on new Loan Structure
« Reply #10 on: April 21, 2009, 03:26:24 PM »
Also just to note Sami, I had a loan in the previous game before the bug, and
when I paid it off early, my rating went way down! so it does have a bad affect!

charger27

  • Former member
Re: Question on new Loan Structure
« Reply #11 on: April 21, 2009, 03:51:55 PM »
Also just to note Sami, I had a loan in the previous game before the bug, and
when I paid it off early, my rating went way down! so it does have a bad affect!
Did you get penalized for paying early?
With an additional amount of money by way of a fine I mean.


thetallone24

  • Former member
Re: Question on new Loan Structure
« Reply #12 on: April 21, 2009, 04:18:43 PM »
Hey,

Yes I did (couldn't tell you the figures though)

But I was more annoyed at the damage to my credit rating,which went from the standard
Class B Elevated Risk, to a very low C class!

charger27

  • Former member
Re: Question on new Loan Structure
« Reply #13 on: April 21, 2009, 04:24:03 PM »
Hey,
Yes I did (couldn't tell you the figures though)
But I was more annoyed at the damage to my credit rating,which went from the standard
Class B Elevated Risk, to a very low C class!
I went from high B to low C just by simply making payments on time, and growing my airline!
I don't know why the loan thing had to be over-complicated - I thought it always worked fine before.

elitemedia

  • Former member
Re: Question on new Loan Structure
« Reply #14 on: April 24, 2009, 09:42:04 AM »
Anyone to give a clear answer about the penalty question ? is that a penalty on the top of what you still to pay for the bank ? or is this just the amount you have to pay for close this loan ?

Jps

  • Former member
Re: Question on new Loan Structure
« Reply #15 on: April 24, 2009, 09:44:59 AM »
Anyone to give a clear answer about the penalty question ? is that a penalty on the top of what you still to pay for the bank ? or is this just the amount you have to pay for close this loan ?
It's just the amount you pay back, if you wish to pay it all at once, but the amount is higher than what you'd pay if you'd just let the loan go till the end on its own.

elitemedia

  • Former member
Re: Question on new Loan Structure
« Reply #16 on: April 24, 2009, 09:46:52 AM »
 :o Well i hardly understand this, in real life if i pay back a credit before it's term, i save on interest rates, and sure don't get a penalty....

Jps

  • Former member
Re: Question on new Loan Structure
« Reply #17 on: April 24, 2009, 09:50:31 AM »
:o Well i hardly understand this, in real life if i pay back a credit before it's term, i save on interest rates, and sure don't get a penalty....
Yeah, well, read a bit this topic, and you'll see a lot of discussion about this, as well as the reason why Sami decided there is the penalty.

elitemedia

  • Former member
Re: Question on new Loan Structure
« Reply #18 on: April 24, 2009, 05:43:12 PM »
Yeah, well, read a bit this topic, and you'll see a lot of discussion about this, as well as the reason why Sami decided there is the penalty.

I read very good the topic, and no one really can explain why there should be penalties, i dont know any bank that will charge you penalties because you give the money back earlier than what was expected...

Jps

  • Former member
Re: Question on new Loan Structure
« Reply #19 on: April 24, 2009, 07:07:13 PM »
I read very good the topic, and no one really can explain why there should be penalties, i dont know any bank that will charge you penalties because you give the money back earlier than what was expected...
Well, I don't have any real world experience, but that's exactly what I am thinking. Like, I have to pay to give the money its money back? Of course, like was said, it could cause extra costs for the bank, fi they have to rethink about where to put that money, but yet, punish their customer for that?

 

WARNING! This website is not compatible with the old version of Internet Explorer you are using.

If you are using the latest version please turn OFF the compatibility mode.